Satu Dahl analyses the bidirectional transatlantic air freight market and looks at how major gateways and airlines are gearing up to accommodate growing freight volumes.
Cargo business is making a growing contribution to airline revenues. IATA’s data for global air freight markets in 2018 revealed that, overall, the market is growing. Demand, measured in freight tonne kilometres, grew by 3.5 per cent when compared to the previous year.
Freight capacity rose by 5.4 per cent in 2018, measured in available freight tonne kilometres. IATA says that despite several negative factors, including the weakening of the global economy and consumer confidence, international e-commerce grew in 2018, contributing to the growth of the cargo demand.
As well as rising volumes, cargo costs have fallen in real terms – in the past 20 years, compared to other prices in the economy, per tonne kilometre flown, air freight user costs have fallen around a half, IATA’s Chief Economist Brian Pearce notes in his ‘Cargo Outlook 2019’.
When looking at the performance more closely by region, IATA’s analysis shows that air freight markets are expanding in the US and Europe. In the US, the total annual growth in demand for air cargo in 2018 was 6.8 per cent, matching the rate of capacity increase of 4.5 per cent.
Across the Atlantic, the annual growth in demand for air cargo in Europe was 3.2 per cent and capacity increased by 4.3 per cent, the report says. It is no surprise therefore that airlines are growing their share of the transatlantic market.
One example of this is American Airlines Cargo which had an exceptional year in 2018, exceeding multiple all- time records in performance, volume and revenue and finishing the year with more than $1 billion in revenue.
The airline added more destinations in the European market last year, which included a service from Philadelphia to Budapest and Prague, Chicago O’Hare to Venice and Dallas Fort Worth to Reykjavik.
In January, American Airlines Cargo announced that, starting this summer, it will begin operating a new seasonal non-stop flight from Dublin to Dallas Fort Worth, directly connecting the two for the first time in the airline’s history.
“Traditionally, North America is the most important destination for Irish exports by air, with many US companies across diverse industries having manufacturing bases in Ireland.
“This first direct flight from Dallas Fort Worth to Dublin using our 787-9 is ideally suited to supporting the export demand from Ireland. And of course, the onward connections – up to 900 per day from DFW to South and Central America – also have considerable appeal for Irish shippers and forwarders,” Andy Cornwell, regional sales manager – Northern Europe, American Airlines Cargo, explains.
In addition to American’s new DUB flight to DFW, the airline also offers flights from DUB to Charlotte (CLT), Chicago O’Hare (ORD) and Philadelphia (PHL), as well as seasonal service from Shannon (SNN) to PHL.
Regarding the commodities and volumes, the airline will be transporting on the Dallas- Dublin route, Cornwell says: “This is a seasonal flight running from early June through to the end of September and we anticipate wide appeal which will deliver strong volumes.
“Texas is the second largest importing state in the US and customers with potential commodities including computer parts, medical devices, machinery, oil industry equipment, aviation parts and pharmaceuticals are already expressing interest in using the service.”
When discussing which European routes see the most demand for cargo, Cornwell says that, from the airline’s perspective, all of them do. However, he says: “There are clearly some which I would single out. For example, our pharmaceutical hub in Philadelphia continues to flourish as shippers and forwarders alike recognise our capabilities when they are working in that sector.
“It’s served from a number of European cities which will be further expanded this summer, with additional service from Edinburgh, Berlin-Tegel in Germany, Bologna in Italy and Dubrovnik in Croatia.
“Then, of course, there is our highly successful European trucking operation, which supports shippers and forwarders who don’t have easy access to our network, but when we offer a trucking operation from their local airport we can give them a quality service to the nearest hub. That’s had notable success for southern French cities who can truck their cargo into Barcelona.”
Continuing to discuss the demand for air freight capacity in the bidirectional transatlantic market, Cornwell says: “Our widebody capability between Europe and the US means there is consistent demand for cargo services across the pond in either direction.
“Flights to and from our US gateways to the major capitals such as London (LHR) and Paris (CDG) and major cities such as Frankfurt (FRA) perform well on a year-round basis and the new additions to our network for the summer season always generate considerable cargo interest making the transatlantic very positive for us.”
Cornwell adds that to meet ongoing demand, the carrier has a new daily year-round service from Charlotte (CLT) to Munich (MUC) in Germany and also a summer seasonal service between DFW and Munich. Other seasonal services this year include Chicago (ORD)–Athens (ATH) and Phoenix (PHX)–LHR.
Regarding competition and the development of the market between the US and Europe, Cornwell says the transatlantic sector has always been a competitive market and that’s not going to change any time soon.
“The key to operating successfully in the market is to really understand the needs of our customers and to use our frequency and capacity to meet these needs – the same goes for the other regions of the world we operate in too. American has both of these, and, as a result, air cargo is a key contributor to the bottom line of the airline as a whole.”
Investment for growth
Busy cargo airports in the US and Europe are investing in their facilities to accommodate growth in the freight market. Brussels Airport, one of the major air freight hubs, is currently investing €100 million in ultramodern logistics buildings.
Commodities transported between Brussels and North America include chemicals, industrial goods, machinery parts, pharmaceuticals and perishables, the airport says. Brussels Airport has seen a rise in demand for the bidirectional transatlantic cargo; export-wise, it has seen volumes to the US growing with +/- 14 per cent, and its import volumes in 2018 were slightly higher compared to the year before.
Commenting on the future air freight market between the US and Europe, Brussels Airport says it will be affected by the outcome of the negotiations on the trade agreements between the US and the rest of the world. “We believe the trade between Canada and Europe/Belgium will grow further because of the CETA agreement.
“Other countries might address directly to the European market, and Brussels becomes an excellent choice as an entry point for Europe. We also see the volumes of pharmaceuticals grow further in both directions also with the US.”
Munich Airport is another busy hub for transatlantic freight. Cargo commodities transported between the Munich region and the US consist of both high volume and high yield goods, mainly in the fields of mechanical engineering, biotech and life science, high- tech electronics as well as automotive.
The airport says that continuing these cargo goods are top products from the German industry manufactured in plants that are located in southern Germany or in the Munich region.
The airport states that today, it offers 133 weekly departures serving 13 of the most important industrial areas of the US. The belly capacity offered from Munich comes up to the transport volume of about 25 loads of B747 freighters per week.
With the new summer timetable – with new American Airlines flights and a daily service to DFW and CLT, and with Lufthansa increasing frequency on their route to Chicago – the cargo volume has grown again.
“The Munich-Chicago route is now being served four times a day, with both Lufthansa and United Airlines, and has become the most frequented cargo relation,” the airport says.
Munich Airport also says it serves as a cargo hub for southern Germany and, especially for the US, it is a successful gateway for air cargo from northern Italy, Austria, Switzerland, Hungary, the Czech Republic and Slovakia, as appropriate flights to US destinations may not be available out of these countries.
Instead, these regions are very well connected with Munich Airport by frequent road feeder services and the airport’s infrastructure to handle air cargo is unique and offers very fast processing facilities that attracts high demand for cargo capacities on all direct flights from Munich to US destinations.
Commenting on demand, the airport states: “If we compare figures of an impressive year 2017 with those of 2018, we can confirm that the cargo volume has stabilised on a high level.”
Continuing on how it thinks the air freight market between the US and Germany will be developing in the next few years, the airport says that this is certainly a difficult question in turbulent times, but traditionally Germany and the US are maintaining close and stable economic relations.
“Currently, political discussions with the threat of extra import duties and other instruments of protectionism may influence our trade relationship. It may even cause a relocation of the exchange of goods which will then certainly affect the US/European air cargo market.
“For that reason, future development will highly depend on partnership and trust, on the same level playing field, not to mention other global threats that we might have to face. But with the strong economic ties that we have built up over the decades, we trust that we will see robust and lasting air cargo relations between the US and Germany.”
A representative from Berlin-Tegel and Berlin- Schönefeld says that air cargo from Germany’s capital region to the US has increased by approximately 10 per cent per annum since 2016.
The busiest US cargo destinations for Berlin are Chicago and New York and, if there will be no trade barriers, the airports expect healthy growth for the next couple of years.
Main export commodities from the area include pharmaceuticals such as Bayer healthcare products, electricals such as Siemens goods, machinery including BMW motorbikes and Rolls-Royce aircraft engines.
Major US airlines Delta, United Airlines and American Airlines as well as Canadian carrier Air Canada Rouge are serving Berlin. American Airlines hosted a press conference recently at travel trade fair ITB Berlin where it announced a new non-stop connection between Berlin-Tegel and Philadelphia.
Starting in early June, American Airlines will be flying this route four times a week.
Florida-Europe cargo links Miami International Airport (MIA) is a significant hub for cargo carriers, hosting an impressive number of international freight airline operations and housing American all-cargo airline Amerijet’s primary hub.
The airport has introduced several new cargo initiatives in recent years, including approval by the US Department of Commerce to designate the airport’s entire 3,230-acre land parcel as a ‘Foreign Trade Zone’ magnet site.
This results in allowing airport tenants to operate manufacturing, warehousing and/ or distribution centres on airport property and have their federal tariffs deferred, reduced or eliminated, resulting in time and cost savings for approved importers and exporters.
The airport also launched a programme which allows perishable freight from local seaports to be trucked to MIA and depart by air without customs duties.
European carriers are moving into the lucrative South Florida freight market. According to Miami Airport’s Cargo Hub 2018 publication, Europe is the third most important trading region after South America and Central America, with the value of the 78,059 transported tonnes totalling $11,245,917,194 and Germany ranking ninth out of all its global trade destinations.
Last year Air Italy, which has its cargo hub in Milan Malpensa Airport, launched flights to Miami International Airport.
MIA says three European carriers are entering the Miami market in 2019: low cost carrier Norwegian which has already begun its Miami-London Gatwick operation, LOT Polish Airlines which will begin four weekly flights to Warsaw in June, and French airline Corsair which will launch a MIA-Paris Orly service, also this summer.